Plastic Logic announced tonight that it was "moving on" to a second-generation e-reader, and would not sell its original product. The decision is a major blow to the company, which has spent years developing electronic ink technology that allows semiconductors to be printed on plastic rather than being based on silicon.

The Que had been under development for several years and was one of the stars of the CES electronics show in January, but it appears that the success of rival products – such as the Amazon Kindle and Apple's iPad tablet computer – means the original Que is no longer commercially viable.

"We recognise the market has changed dramatically, and with the product delays we have experienced, it no longer make sense for us to move forward with our first generation electronic reading product," said Richard Archuleta, chief executive of Plastic Logic. "This was a hard decision, but is the best one for our company, our investors and our customers."

Last year the Financial Times and USA Today signed deals to offer their newspapers on Plastic Logic's devices. But the future of the Que was looking shaky after the firm refunded pre-orders in June.

Plastic Logic did not reveal any details about its plans for its second-generation e-reader, with Archuleta saying only that the company would "take the necessary time needed to re-enter the market".

The Que proReader was marketed as a product for business users that would allow books and newspapers to be read in an electronic format. There were two versions, both with touch-sensitive monochrome plastic screens. A 4GB unit that supported Wi-Fi and Bluetooth was expected to cost £400, and an 8GB version which included 3G was priced at £495.

In comparison, Apple's cheapest iPad costs £429, while Amazon will soon starting shipping a Wi-Fi enabled Kindle for £109. Competition from other e-reader makers such as Sony and Barnes & Noble have also helped to push prices down.

Plastic Logic was founded a decade ago by two Cambridge scientists, Sir Richard Friend and Henning Sirringhaus. They raised hundreds of millions of pounds to develop plastic electronics, a technology where semiconducting polymers are deposited onto a plastic surface. Advocates say plastic electronics will ultimately be cheaper than silicon-based circuits.

Critics, though, have warned that the technology is not yet mature. Because the polymers are effectively "printed" onto the substrate material, it can be hard to guarantee that they stick in a way that guarantees good connectivity.

"We are fortunate to have investors who are confident and committed to our company's long-term success in commercialising plastic electronics," Archuleta said. "We thank them, along with our partners and suppliers, and most especially our first customers, for standing with us to pioneer the plastic electronics revolution."

Plastic Logic declined to comment on reports that it is in negotiations with Rusnano, a Russian nanotechnology corporation, about an injection of capital that could effectively see Rusnano take control of the firm.